Everywhere you look, listen or try not to listen you hear the terms foreclosure, short sale and REO in reference to real estate. So many people toss this jargon around without really knowing the difference and so many more hear it and are afraid to ask what it all means. Are they the same? Are they different and if so, how are they different? What about loan modifications? Today, you get the answers.
What is a short sale?
“A short sale is a real estate transaction in which the sales price is insufficient to pat the liens encumbering the property and sale costs, but the seller is unable or unwilling to pay the difference.” – Michelle Lind, AAR General Counsel
What is a REO(real estate owned) or foreclosure, and what is the difference?
“Real estate owned (REO) are properties that go back to the mortgage company after an unsuccessful foreclosure auction.” –Bob Corcoran
These are often referred to as “bank owned” properties.
What is a loan modification?
“A loan modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.” – U.S. Department of Housing and Urban Development
Now you know the jargon. But what does all of this mean?
Foreclosures and short sales mean you will lose your home, unless you are the buyer. If you are the buyer, you will be purchasing a home at a rather large discount. Also, you will have a tax consequence with your short sale.
If you qualify for a loan modification, you will be able to stay in your home and have the payments become affordable. Not everyone will qualify for a loan modification and it is up to the discretion of your lender. It is a very lengthy and involved process, but worth the effort to be able to keep your home.
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